Category Archives: Finance

InvestHK upbeat on Fintech Salon and Fintech Week

As the Asian Financial Forum (AFF) gets under way in Hong Kong today, the government’s investment-promotion agency, InvestHK, is banging the drum about the city’s potential in fintech, announcing that it has set November 2-6 for the next edition of Hong Kong Fintech Week 2020.

The event will be held again at the AsiaWorld Expo next to the airport, which is more spacious, suggesting the agency expects growth in the number of exhibitors this year. Last year’s Fintech Week drew more than 12,000 attendees, up about 50 per cent from the figure in the previous year, and there were 150 exhibitors and 18 trade delegations. That performance was somewhat surprising, given that it happened amid the Hong Kong protests, which had been keeping business visitors away from Hong Kong.

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‘Insurance Connect’ delays; GBA integration goes on

The eagerly awaited “Insurance Connect” scheme remains on hold, with no indication of when it might be launched. However, Hong Kong’s Insurance Authority (IA) and the central government’s China Banking and Insurance Regulatory Commission (CBIRC) are inching forward with cross-border initiatives to spur integration within the Greater Bay Area.

This was made apparent by comments from senior officials and executives at recent forums, in Hong Kong and Shenzhen. Most prominent of these were speeches given by IA chairman Moses Cheng Mo-chi and CBIRC Chief Counsel Liu Fushou. 

Speaking at the Asian Insurance Forum in Hong Kong on December 10, Liu said that the key would be to establish regional regulatory mechanisms for insurance institutions to operate across the GBA. “Our next step is to facilitate the set-up of insurance institutions in the GBA through various approaches, particularly to help those with the expertise and features suited for GBA development.”  

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Publicly traded bond debuts in Macau

Zhuhai’s biggest state-owned conglomerate, Huafa Group, has just given Macau a vote of confidence, becoming the first non-Macau company to issue a publicly traded bond on the city’s nascent exchange. 

Huafa group announced the successful issue at the weekend, saying it is the first publicly offered bond registered and issued by the Macau Financial Assets Exchange (MOX).

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GBA financial integration seen as priority

The Greater Bay Area is where cross-border fund flows are growing the fastest, and where future development potential is the strongest. This is why the provincial government is focused on supporting deeper integration of the financial industry in Hong Kong and Macau with Guangdong, says a senior provincial official.

He Xiaojun, director of the Guangdong Local Financial Supervision Bureau, says cross-border fund flows within the GBA accelerated this year to reach 14.08 trillion yuan. No comparison with the previous period was given, although He added that Guangdong had 248 listed companies in Hong Kong, and their cross-border settlement activity had helped to boost fund flows.

Speaking at the Greater Bay Area Financial Development Forum in Guangzhou, He said that, as of the end of September, the Shenzhen-Hong Kong Stock Connect scheme had registered transactions in the same period worth 8.4 trillion yuan. Net inflow of cross-border funds was 151.89 billion yuan. 

“The financial allocation capabilities and influence of the Greater Bay Area have been further enhanced,” He said, adding that the growth rate of major financial indicators in the banking, securities and futures, and insurance markets was higher than the national average.

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Guangzhou sees future in blockchain

The provincial capital is not often thought of as a financial center. It doesn’t have a stock exchange of its own, and financial services comprise less than one-tenth of GDP. This contrasts with Hong Kong and Shenzhen, where financial services contribute roughly twice as much (19%-20%) to GDP. Guangzhou, instead, has traditionally been known as an industrial powerhouse, dominated by state-owned enterprises in heavy industries and SMEs in export-oriented manufacturing.

Yet Guangzhou’s ambitions for developing financial services should not be underestimated. This is especially as the Nansha special economic zone is built out in the coming years (see our primer on Nansha, and its World Financial Island in Hengli). That is where a GBA International Bank is being built, and where a new Futures Exchange will be launched, initially trading carbon credits.  

Indeed, Guangzhou is showing that a city doesn’t need to have a stock exchange to make its financial sector go. And with the rise of fintech, it remains to be seen how the entire industry will be shaken up to the point where traditional financial institutions and trading platforms will matter less than they do now.

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Macau pushes for Nasdaq-style offshore RMB market

The central government is giving serious consideration to a formal proposal submitted by Macau to establish a new kind of stock exchange in the Special Administrative Region. Traded in the offshore Renminbi, stocks listed on this exchange would be heavily weighted toward technology companies, much like the Nasdaq board in New York, and the recently established STAR Market in Shanghai.

It looks like this new market is part of a broader move within the region, if not the rest of country, to embrace diverse means of raising equity for Chinese companies. At the same time, Guangdong is looking into establishing a market like Shanghai’s STAR Market, in Guangzhou. And it has also applied formally to establish a Commodity Futures Exchange, like the Chicago equivalent, in Guangzhou’s Nansha district.

Could this be the start of a major push to get more Guangdong-based companies into the hands of equity investors? It certainly seems so, and there is huge upside room to move on this: just 1.8% of Guangdong’s 45,000 National-Level technology firms are publicly listed. Moreover, the person who revealed the details is just the kind of official to make this clear – and public.

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CSRC to ‘fully support’ Shenzhen’s capital markets

The head of the country’s stock market regulatory agency says Shenzhen’s capital markets will continue to pursue reforms that aim to completely open it to the international investment community. Step by step. As soon as possible.

Observers who have been champing at the bit to see further opening of China’s capital market may be forgiven a yawn. At first glance, this sounds like the usual reassurances from a regulator that reforms are proceeding ASAP, when the reality is different. But Yi Huiman (above, left), head of the China Securities Regulatory Commission, was speaking to local media during an inspection tour of Shenzhen earlier this week. It was his first visit following the city’s designation as a Pioneering Zone for Socialism with Chinese Characteristics, and he was in the company of Shenzhen’s leader, Party Secretary Wang Weizhong (above, right), who is also Deputy Party Secretary of Guangdong.

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Shenzhen listed firms soar in 1H

Shenzhen’s publicly listed companies produced a stellar result in the first half of this year, with overall revenues up 12.17% and profits up 33.45%, significantly higher than the national average of listed companies.

Average return on equity reached 7.91%, which local media said was “higher than in recent years.”

The semi-annual report from the Shenzhen Securities Regulatory Bureau shows that 292 listed companies in Shenzhen have assets of RMB 25.96 trillion and net assets of RMB 3.83 trillion. These are ranked third behind Beijing and Shanghai, but their combined market cap of RMB 6.41 trillion ranks ahead of Shanghai, second to Beijing.

The net profit growth rate was 20 percentage points higher than the same period of last year. It compared with the national average for listed companies of 6.6%.

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HK stares at tourism abyss as funds keep flowing

Hong Kong remains China’s key gateway for foreign investment despite the protests, according to the latest data from Beijing. As SCMP reports, China received US$62.9 billion in foreign direct investment via Hong Kong in the first eight months of this year, accounting for 70 per cent of total inflows. The rise was even sharper once the monthly number for August was calculated: US$7.53 billion, up 29.2% from the same month last year.

It’s hard to blame or credit these flows on anything Hong Kong is doing, as Investment decisions into China are often months, if not years, in the planning. Still, the numbers might bring some comfort at a time when the tourism pillar of the economy is crumbling. 

According to this SCMP report, Causeway Bay is struggling, with one in ten shops standing empty and thousands of staff facing job losses. We think a very painful withdrawal experience lies ahead as the city is forced off the drug that it has been hooked on since 2003. Mainland tourists have other options, including Macau, and once mainland tariffs on imported goods start being completely repealed, they will likely have little reason to come back – even if the protests somehow start to subside.

Across the city, the hotel industry is reeling. But landlords appear to be doing what they do best: forcing management companies to let go of staff while they figure out the best way to reconvert the buildings into office space. And they are in the meantime looking to move their real-estate projects as fast as possible before prices start to fall off a cliff as the government strong-arms them into offering below-market discounts.

Hong Kong needs a big, new vision for its future.

HKMA chief unperturbed by short-sellers

After a weekend of chaotic scenes in Hong Kong, including fistfights between rival camps in the streets, Hong Kong’s outgoing monetary chief, Norman Chan, tried to present a picture of fortitude and calm to investors today. 

As SCMP reports Chan saying: “The financial market in Hong Kong is much bigger nowadays than at the time during the Asia financial crisis in 1998. The short sellers who want to attack the local currency would find they would need much more bullets to carry out the attacks, which would be too expensive for them to so. As such, the public does not need to worry about the short sellers’ attack to the peg as they would not be able to repeat what the short sellers were doing during the Asian financial crisis.”

He does have a decent argument. The Exchange Fund stands at HK$4.138 trillion (US$528.73 billion), 4.5 times more than the level at the end of 1998, when it was last attacked by speculators in the wake of the Asian Financial Crisis. He also says there is no evidence of a major movement of capital out of Hong Kong. 

However, one has to wonder why Chan is bothering to comment at all, if the government’s ammunition is so extensive that the public need not worry about it. While Chan says there have not been significant short positions taken against the HK dollar recently, is he seeing something he doesn’t like in the way local depositors are switching into US dollars? We will just have to wait and see.